UCLA Anderson Global Supply Chain Blogtag:typepad.com,2003:weblog-1056272514613634692018-11-26T08:00:00-08:00About UCLA Anderson Global Supply Chain Blog
This blog is developed by the Decisions Operations and Technology Management (DOTM) Faculty at the UCLA Anderson School as well as special guests. It is intended to report, analyze, and comment on events that relate to current Global Supply Chain Management issues. Each blog is presented in English, (Simplified) Chinese, and (Castilian) Spanish, and it can take one of the following formats:
(a) An Interview -- the author formulates questions about a current issue, and the interviewee provides commentary.
(b) An insight -- the author provides insights concerning global supply chains, including current events.
(c) An analytical piece -- the author analyzes a particular supply chain issue and formulates descriptive and/or prescriptive views.
For more information on the blog contributors, check the DOTM website.TypePaducla/mTFbhttps://feedburner.google.comWill traditional restaurants become traditional taxis in the gig economy?tag:typepad.com,2003:post-6a0115710a4d7d970c022ad3724ea9200c2018-11-26T08:00:00-08:002018-11-26T08:00:00-08:00Christopher Tang Local restaurants are struggling to get customers to eat in. To capture those office workers and consumers who are too busy to eat out or take out, many restaurants are partnering with food-ordering and delivery startups such as Grubhub (US), Deliverloo (UK), and Ele.me (China). These startups can...UCLA Anderson DOTM area

Christopher Tang

Local restaurants are struggling to get customers to eat in. To capture those office workers and consumers who are too busy to eat out or take out, many restaurants are partnering with food-ordering and delivery startups such as Grubhub (US), Deliverloo (UK), and Ele.me (China). These startups can connect local restaurants with diners by posting restaurant menus online for diners to place their orders to be picked up and delivered by independent contractors. In 2018, McDonald's partnered with Uber Eats, and Dunkin' uses DoorDash. These startups make money by charging restaurants a commission fee based on the value of the orders placed through their platforms. Without owning physical assets and without employing delivery workers, these platforms can expand and scale up in different cities around the world just like Uber! No wonder Yum Brands (parent company of Pizza Hut, KFC and Taco Bell) took an ownership stake in GrubHub.

The business model is working well for GrubHub, DoorDash, Uber Eats, Deliveroo, Ele.me, etc., but it is not clear if this business model is beneficial for those partnering restaurants. Here is why. First, for high-end restaurants, they demand high profit margins by offering unparalleled on-site dining experience. Their brand image (or value proposition) will be affected negatively if they serve online customers that value convenience over experience. Second, for those restaurants that serve the mass market, they compete on price and operate with razor-thinned margins. Their margins will be squeezed even further when these platforms charge a commission fee that is 15% to 30% for each order. Third, these platforms may even cannibalize the dine-in sales with higher margins.

These platforms are good for consumers, but they can be a nightmare for traditional restaurants for the following reasons. Once customers get used to stay at home and stop eating out, many restaurants will earn a much lower margin but they still need to pay a high real estate cost. In that case, these restaurants may end up competing with cloud kitchens that enable entrepreneurs to cook meals in a shared facility exclusively for online orders without incurring the cost of prime retail space. In 2018, Deliveroo launched its cloud kitchen lots for entrepreneurs to rent in London and Paris.

If these cloud kitchens become successful, these online meal ordering and delivery platforms may no longer need to partner with local restaurants in the future. It is likely that some local restaurants will be left in the dust, while others may end up operating in the cloud.

https://blogs.anderson.ucla.edu/global-supply-chain/2018/11/will-traditional-restaurants-become-traditional-taxis-in-the-gig-economy.htmlCan Elon Musk learn from Lucille Ball?tag:typepad.com,2003:post-6a0115710a4d7d970c022ad398714a200d2018-10-22T08:00:00-07:002018-10-22T08:00:00-07:00Christopher Tang Tesla’s production of Model 3 hits a snag. I am a fan of Elon Musk – the visionary who created Tesla and SpaceX. At the same time, I worry about his lack of understanding of Operations Management. As a case in point, let us consider a story reported...UCLA Anderson DOTM area

Christopher Tang

Tesla’s production of Model 3 hits a snag. I am a fan of Elon Musk – the visionary who created Tesla and SpaceX. At the same time, I worry about his lack of understanding of Operations Management. As a case in point, let us consider a story reported in Wall Street Journal.[1] Musk asked why the Tesla’s assembly line had stopped. One of the senior engineering managers explained that it was due to a safety measure. Musk fired this manager, but Tesla claimed that this manager was fired for other reasons.

Regardless of the reason(s) to fire this manager, his explanation to Musk reminded me of the 1952 classic “I Love Lucy” episode in which Lucy was the “bottleneck” who could not keep with the candies rolling off the conveyor belt. When running a factory, many bosses often want to see things moving and workers working at all times because they tend to believe that idle machines and workers are wasteful! The boss is always right, no?

Actually, there are two good reasons for not keeping the machines and workers busy at all times. First, in our MBA Operations Management (OM) core course, we discuss the classic novel “The Goal”[2] to illustrate that most assembly lines are “imbalanced” so that some process steps are slower than others. When an assembly line is imbalanced, the output rate of the line is dictated by the processing rate of the bottleneck (usually the slowest stage in the assembly process). Therefore, it is optimal to get every step to operate according to the processing rate of the bottleneck. In doing so, it is natural to see some non-bottleneck stages will be idle some of the time. If the boss insists to keep every stage busy at all times, then many work in process inventory will be piling up in front of Lucy!

Second, in our OM course, we discuss the classic Toyota Production System that it is a good practice to “stop the line” whenever there is a problem (processing time delay, quality issue, irregular parts, etc.). In doing so, the “problem” will be exposed and the organization can learn and find ways to address the underlying causes to solve the problem right away. The Toyota Production System is a proven process, and it was actually implemented at the Toyota-GM NUMMI plant before it is now known as the Telsa’s factory in Fremont, California. Perhaps certain OM lessons can help Tesla’s production back on track!

Walmart is a globally recognized leader in big-box retail. Walmart is responsible for $500 billion in annual revenues, operates in 28 countries and employs 2.3 million people worldwide [1]. Everyone knows the giant superstore for its low-cost strategy and “everyday low prices.”

What people do not know is how efficient Walmart’s supply chain needs to operate to keep up with its cost strategy. For a network as large as Walmart, its distribution must be streamlined to deal with large quantities of product and SKUs going to and from suppliers to eventually end up in the retail stores. In the United States, Walmart operates with a hub-and-spoke distribution model for its grocery distribution, which accounts for an estimated 22% of the US grocery market [2]. It uses 44 distribution centers with over 35 million square feet of space [3]. On average, grocery products travel 134 miles to get from the given distribution center to a retail outlet. With such a large and complex network, managing it end-to-end is challenging and food waste becomes a major problem.

Each day, Walmart’s global network generates 3.5 million tons of food waste, which equates to $2.6 trillion in annual cost and results in a $7.4 billion loss for Walmart’s P&L [4]. To mitigate this problem, Walmart has begun actively setting targets to reduce waste using waste scorecards and other tracking mechanisms [5]. Additionally, for every new supplier there is a comprehensive set of actions that the supplier must take to make sure it adheres to Walmart’s standards [6]. Walmart has also explored using blockchain technology to better track its products and control food waste [7]. Furthermore, Walmart imposes penalties on suppliers for delivering products either too early or too late [8]. At minimum, these are some small steps that Walmart has initially taken to increase awareness of the food waste issue.

In 2018, Walmart introduced a new technology called Eden to meet the challenges of food waste. Eden is a suite of apps that employees can use at every stage of the supply chain to improve the quality and flow of produce from farm to shelf [9]. The technology includes a digital library of food standards with over a million photos from which they have created a freshness algorithm that identifies spoilage and prioritizes the flow of fresh produce. Upstream in the supply chain, Walmart’s size and buying power allows them to negotiate information sharing agreements to get valuable information about the time in the field prior to cooling, which has an impact on shelf life. From here Walmart’s chained distribution allows them to optimize the flow of produce. Finally, store employees can use this information to prioritize restocking based on freshness [10]. Eden was developed in house by Walmart employees during a company hackathon and they are continuing to work on improving the technology and adding functionalities.

To demonstrate the impact of a tool like Eden, we can use bananas to estimate the reduction in safety stock once Eden is deployed in the supply chain. Bananas are one the highest volume products sold by Walmart - with over 1.5 billion pounds sold each year [11]. As of now, about 30% of all bananas harvested are wasted [12]. It's likely that Walmart can reduce this waste by 50% by applying Eden technology. Also, by using Eden to better predict when each banana will ripen, it's possible to reduce the average lead time by 2 days -- because the technology would reduce the need to artificially ripen or “gas” bananas, which is typically part of the fulfillment process. With these improvements, a quick calculation using the standard order-up-to formula based on the newsvendor [13], we estimate that Walmart can reduce banana stock by over 23M pounds, which would save the company around $170M annually.

Looking to the future, Eden is poised to create solutions for many of the challenges of produce in retailing. Currently farmers have limited access to information. In the future, Eden can be integrated at the farm level to optimize picking time, creating value through infomediation. There is also an opportunity to upgrade Eden to track freshness at the unit level by applying more advanced analytics. Finally, Eden has the potential to eliminate the need for costly packaging by optimizing the store-to-shelf window. Overall, Eden is an exciting new technology that is sure to have a marked impact on the efficiency of fresh food supply chains.

https://blogs.anderson.ucla.edu/global-supply-chain/2018/09/eden-a-new-technology-to-reduce-food-waste-in-walmarts-supply-chain.htmlImproving the US blood supply chain: some lessons from the UKtag:typepad.com,2003:post-6a0115710a4d7d970c022ad3665062200c2018-08-27T10:26:42-07:002018-08-27T10:26:42-07:00Chloe Kim, Catherine Gao, Amba Gujral, Willa Ni, Ashley Wright, Felipe Caro. Blood and blood products (such as plasma and platelets) have a unique and challenging supply chain because of three major reasons. The supply of blood fully relies on human donations and is not a product that can be...UCLA Anderson DOTM area

Blood and blood products (such as plasma and platelets) have a unique and challenging supply chain because of three major reasons. The supply of blood fully relies on human donations and is not a product that can be manufactured. Blood is a perishable product, especially platelets must be used within 5 days of donation, and red blood cells can only be stored for 42 days [1]. Lastly, inaccuracies of supply and demand can become a matter of life and death as blood is a critical input into a wide range of medical procedures and services, including surgeries, trauma care, and therapeutic intervention.

The supply chain for blood should ideally operate as a fully responsive network that can react to uncertain demand with a short lead time. However, the current blood supply chain in the US is rather fragmented including a diverse layer of stakeholders. The main stakeholders involved are: donors, blood banks such as the American Red Cross (ARC), hospitals, and patients. Figure 1 is a simplified diagram of each player’s role and the processes involved.

Figure 1. Blood supply chain in the US

Large blood banks such as the ARC have distribution centers where they can pool supply before it is shipped to hospitals. Smaller blood centers such as the UCLA Blood and Platelets Center (BPC) operate a more localized system. The UCLA BPC is one of the main blood centers in the greater Los Angeles area but it struggles to meet its daily demand. The UCLA hospitals share a weekly forecast with the UCLA BPC, which is usually able to satisfy 75% of the daily demand from its own stock and must source the remaining 25% from the ARC. The two entities (ARC and UCLA BPC) don’t have a shared IT system and communication takes place via emails and phone calls. The UCLA BPC also has a partnership with UC Irvine in order to share any excess supply or demand.

In contrast to the US, the UK's blood supply chain has transitioned to a centralized and demand-driven (i.e., pull) model. The pull approach starts with digital information that communicates real-time demand from hospitals, which is then passed on to distribution, collection, and finally supply as shown in Figure 2. The National Health Services (NHS), UK’s healthcare organization, calls it a comprehensive “vein-to vein” model [2]. The implementation relies on a vendor managed replenishment system that monitors stock levels every 30 minutes from 70+ participating hospitals. The system enables the NHS Blood and Transplant service to identify the optimal stocking levels and it automatically generates replenishment orders. Such optimization of inventory and replenishment has improved the utilization of fridges and freezers, whilst reducing the level of shipments required to rebalance stock across the network. The transition to the new supply chain has brought savings in excess of £50m per year [3].

Figure 2. The UK vein-to-vein system.

There are several lessons the blood supply chain in the US can learn from its counterpart in the UK. On the demand side, pooling inventories should be the first step to reduce donor recruiting cost, inventory holding cost, and wastage. For instance, hospitals around the greater Los Angeles area could integrate their blood supply chains to benefit from aggregation. According to the UK example, reducing the number of hospitals holding inventory can achieve a 20% reduction in delivery cost and 30% less wastage. On the supply side, a centralized supply chain would create opportunities to improve forecasting at the hospital and blood group level and would allow consolidating donor records and quality monitoring. Finally, the supply chain could be complemented with a unified mobile app to increase user acquisition and retention and dynamically incentivize registrants based on blood types needed. Donate now!

https://blogs.anderson.ucla.edu/global-supply-chain/2018/08/improving-the-us-blood-supply-chain-some-lessons-from-the-uk.htmlSports Jerseys and Lifetime Returns Policytag:typepad.com,2003:post-6a0115710a4d7d970c022ad385516c200d2018-07-31T09:31:51-07:002018-07-31T09:31:51-07:00Bobby S. Nyotta and Christopher S. Tang With the NBA Finals and NHL Finals wrapping up and the FIFA World Cup starting, sports fans are buying jerseys to support their home team, favorite player, and country. At the same time, these jerseys are costly: they can be as much as...UCLA Anderson DOTM area

Bobby S. Nyotta and Christopher S. Tang

With the NBA Finals and NHL Finals wrapping up and the FIFA World Cup starting, sports fans are buying jerseys to support their home team, favorite player, and country. At the same time, these jerseys are costly: they can be as much as $200 on fanatics.com -- the largest retailer of jerseys in America.

Figure 1: The cost of US Men's National Team jerseys is nearly $200[1].

This steep price can make fans think twice about purchasing. Since they are so expensive, purchasing becomes an investment in the player, team, or country. If the jersey style never changes (for example, the Minnesota Timberwolves changed their jersey design and logo before the 2017-2018 season – see Figure 2) or player never changes teams, then the investment has long-term value. However, if the logo changes or the player changes teams, then the jersey becomes “obsolete” and loses its appeal, and all of that money spent on the jersey is wasted. Wearing an outdated jersey is not necessarily a fashion faux pas, but most loyal fans want to be up-to-date with the current roster and team. So, what can jerseys sellers do to nudge fans to purchase their jerseys in the presence of obsolescence risks?

Figure 2: The Minnesota Timberwolves changed their jersey design and logo in 2017[2].

Here is an innovative initiative that NBA has just introduced. During the NBA Finals, we saw a commercial mentioning a joint partnership between fanatics.com, American Express, and the NBA for "Jersey Assurance."[3] This program allows fans to trade in their jersey of a player if the player is traded or the player signs with another team during free agency. Of course, not all changes are covered, such as player retirement or player suspension. The best part for the fan (consumer) is that Jersey Assurance (JA) is free AND shipping on the new jersey is free!

From an operations lens, this retailing policy brings up a few interesting questions:

With JA, the risk of owning a jersey is reduced, so how much more can the jersey manufacturer charge for jerseys?

The NBA is automatically including JA on all jerseys, but if they made it an optional (the same way the airlines offer travel insurance like Allianz at checkout), how much should they charge?

What happens to all of the returned jerseys?

How does this liberal return policy change the demand for jerseys when a player switches teams? For example, prior to the implementation of JA, say the manufacturer has a demand of 50,000 jerseys of a particular jersey, which comes from two main sources: (1) fans of the team and (2) fans of the specific player. However, after the implementation of JA, there is demand from several sources:

Fans of the new team

Fans of the previous team who want to exchange their jersey for an up-to-date jersey

Fans of the player who owned the jersey from the previous team and choose not to exercise their JA option, so they buy a new jersey on the new team

Fans of the player who owned the jersey from the previous team and choose to exercise their JA option, so they exchange the jersey for a new one

Fans of the player who did not own the jersey from the previous team and want to buy a jersey on the new team

Since there are so many factors that go into the demand of a jersey with JA, predicting the demand seems like it becomes a much more challenging task and depends on:

Estimating the percentage of buyers who support the team versus the player

Estimating the percentage of buyers who will exercise the JA option and do the exchange. Considering that $41B in gift cards were not claimed between 2005 and 2011[4], it is quite possible that people simply will forget to use their JA privileges and never do the exchange.

Now, the question is how many jerseys should the manufacturer produce? Should the make 50,000 like they were doing previously? Or less? Or more?

One possible way manufacturers can combat this aforementioned demand uncertainty is to create generic, name-less jerseys for each team and then wait until the last minute, when demand is realized, to print player names and numbers. New advances in technology, such as 3-D printing, make this possible, which is exactly what Nike and HP are doing[5].

A final thought against the participation in JA:

An obsolete jersey has re-sale value because they are never made again. At some point an obsolete jersey can become “vintage” in which case the jersey is fashionable again, but the time for this to happen can be 10 to 15 years and only happens if the player has had a fruitful, successful career. Companies like Mitchell & Ness specialize in manufacturing these vintage or “throwback” jerseys, which can sell for over $350. Fans who hold on to jerseys for nostalgia or in hopes it will become a “collector’s item” probably would not want to participate in the JA program. So the premium that is added to the jersey cost because of JA could possibly prevent this customer class from buying a jersey. This is a good case for making the JA plan an opt-in plan that customers can purchase.

https://blogs.anderson.ucla.edu/global-supply-chain/2018/07/sports-jerseys-and-lifetime-returns-policy.htmlSaving Rhinos from Extinction in an Intelligent Waytag:typepad.com,2003:post-6a0115710a4d7d970c022ad3980f6e200b2018-06-11T09:45:18-07:002018-06-11T09:45:18-07:00Christopher Tang There are five species of Rhinos (while, black, greater one-horned, Sumatran and Javan). While the last two Asian species are critically endangered, the other three are endangered because they are hunted by poachers for their horns some Asians believe that Rhino horns can be used to treat certain...UCLA Anderson DOTM area

Christopher Tang

There are five species of Rhinos (while, black, greater one-horned, Sumatran and Javan). While the last two Asian species are critically endangered, the other three are endangered because they are hunted by poachers for their horns some Asians believe that Rhino horns can be used to treat certain ailments.

Over a decade from 2007 to 2017, over 7,245 African Rhinos have been lost to poaching. By 2017, there are only 100 Sumatran Rhinos and 60 Javan Rhinos left in Asia, and approximately 28,000 Rhinos of the other three species left in Africa. Rhinos will be extinct without human intervention. First, one can reduce the demand of Rhino horns by changing the beliefs of certain Asians and improving law enforcement about the trade of Rhino horns. However, this will take time, and time is running out. Second, one can reduce the poaching of Rhinos in South Africa. Over the last decade, many organizations such as WWF and Save the Rhino collect donations and contributed funds to recruit more rangers to safe guard these Rhinos. There is a decline in the number of Rhinos poached in South Africa, but it is very costly and inefficient to rely on these ranchers without additional help. Despite intensive efforts to protect Rhinos using armed rangers, drones, and trained tracker dogs, more than 1000 Rhinos are being poached in each year.

Help is on its way. First, through direct observations, scientists from IBM learned that Zebras normally move along-side Rhinos. When facing a predator (e.g., a lion), a herd of zebra will scatter. However, when encountering a poacher with a gun, these animals will move in opposite direction. Anticipating this behavior, these scientists put radio collars on zebras so that they can monitor the location and movement of these zebras. This way, they can alert the rangers when the zebras move in opposite direction.

Second, using historical data on poaching incidents, computer scientists are using machine learning to predict when and where Rhinos were likely to be poached. This way, rangers and drones can patrol these target areas to reduce the number of incidents.

These two approaches are encouraging first step, but much more need to be done to save these Rhinos from extinction.

https://blogs.anderson.ucla.edu/global-supply-chain/2018/06/saving-rhinos-from-extinction-in-an-intelligent-way.htmlModernizing an old industry using Agriculture Technologytag:typepad.com,2003:post-6a0115710a4d7d970c0223c84937b6200c2018-05-07T09:12:26-07:002018-05-07T09:12:26-07:00Christopher Tang Venture capital community is getting excited in investing in agriculture technology to modernize the agriculture sector – a US$ 7.8 trillion industry representing 10% of global GDP. By 2015, the venture capital invested over US$4.6 billion on different agriculture technologies including agriculture drones, online markets, online knowledge sharing...UCLA Anderson DOTM area

In Kenya’s highlands, farmers grow tea, beans, mangos and bananas, but they find it hard to know when the harvest and send them to market. Without any form of coordination, farmers can end up waste their time and effort when too many farmers sell the same type of fruits in the same market. When this happens, they have to haul their fruits back to the farm to feed them to the animals.

Through a grant from the Gates Foundation, MasterCard Lab for Financial Inclusion launched 2KUZE in 2017. 2KUZE is a mobile platform that connects smallholder farmers, traders, buyers, and banks in East Africa. Through this mobile app, farmers can use their mobile phones to check on the prevailing market price for certain fruits in the market. If they decide to sell their fruits at the prevailing price, they can conduct the entire transactions of selling produce and receiving mobile payments without facing price risks.

Besides this mobile market platform 2KUZE, WeFarm, an agri-tech company based in the UK, has developed a peer-to-peer knowledge-sharing platform for farmers to exchange text messages about different farming techniques. Other agri-tech mobile platforms enable farmers to upload pictures of pests from their mobile phones so that other farmers can offer suggestions to control these pests. With the support of these new agriculture technologies, farmers are improving their yield. This way, farmers can grow more and sell more, when consumers have more affordable food to eat.

https://blogs.anderson.ucla.edu/global-supply-chain/2018/05/modernizing-an-old-industry-using-agriculture-technology.htmlBlockchain can make global supply chains more efficient and securetag:typepad.com,2003:post-6a0115710a4d7d970c01bb09f8eadc970d2018-04-16T08:00:00-07:002018-04-16T08:00:00-07:00Christopher Tang There are two sides of a bitcoin: a cryptocurrency that enables anonymous individuals to facilitate transactions using a decentralized digital currency without a middleman (such as a bank or credit card company).[1] One side is labelled risks because bitcoin has involved in money laundering activities, ransom collections (e.g.,...UCLA Anderson DOTM area

Christopher Tang

There are two sides of a bitcoin: a cryptocurrency that enables anonymous individuals to facilitate transactions using a decentralized digital currency without a middleman (such as a bank or credit card company).[1] One side is labelled risks because bitcoin has involved in money laundering activities, ransom collections (e.g., victims of the WannaCry ransomware attack in 2017 paid their ransoms in bitcoins), illegal transactions on the dark web, etc.

The flip side is labelled opportunities not because of bitcoin but its underlying “blockchain” process. After the development of bitcoin invented by Satoshi Nakamoto in 2009, computer scientists, software industry, and the banking industry were intrigued by the potential applications of bitcoin’s underlying “blockchain” process. Essentially, blockchain is a shared database that enables different users can append new data, authenticate user’s new data with strong cryptography, and provides incentives for other strangers to manage and secure updates. In 2014, Vitalik Buterin and his team developed a public, open-source blockchain-based computing platform that is known as Ethereum. This public blockchain enables users to store and execute smart contracts.[2]

Unfortunately, someone siphoned US$60 million in ethers (Ethereum’s version of bitcoin) from an autonomous version of a venture capital fund project (the Distributed Autonomous Organization) in 2016. This incident really calls the security of public blockchains into question. In 2017, more firms are working together to experiment the viability and the benefit of “private” blockchains known as “permissioned blockchains”. Unlike public blockchains that lack visibility of user identity and lack of governance, all users are known to each other in a private blockchain. Also, all rules of engagements are established in advance including which users have what rights to append new data to the end of the chain as a block (i.e., blockchain), and all updates are monitored and verified by other users.

The notion of private blockchains has sparked interest in the financial service industry. Currently, Depository Trust and Clearing Corporation (DTCC)[3] is leading different projects with banks (e.g., Wells Fargo, Bank of America), investment banks (e.g., J.P. Morgan), credit card companies (e.g., Visa, MasterCard) to launch different blockchain networks in late 2018, handling over US$ 11 trillion worth of credit-default swaps.

Besides the financial service industry, startups such as Axoni and Chains are developing industry-friendly codes that can enable customers to execute smart contracts in a private blockchain. At the same time, Microsoft is developing a middleware that provides digital keys to authenticate and authorize certain users to append new data.

IBM is developing new services using private blockchains that are based on Hyperledger Fabric, a distributed ledger with smart contracts. Knowing the ocean freight industry is very inefficient because a simple shipment from one country to another country can involve over 30 companies (exporters, freight forwarders, shippers, ocean carriers, banks, insurance companies, security inspection companies, customs authorities, importers, port operators, ground transportation logistics companies) and few hundreds of interactions and communications to facilitate notification, verification, approvals, and financial transactions. In the ocean freight industry, many steps are conducted manually with lots of paper work.

By noting that the ocean freight process usually involves many users that are known to each other and these users interact with each other in a fairly routine manner, IBM and Maersk formed a partnership in March 2017 to develop a private blockchain solution to digitize, manage, and track shipping transactions. This blockchain solution is intended to help manage and track the paper trail of tens of millions of shipping containers globally by digitizing the supply chain process from end to end with enhanced transparency and security (in terms of information sharing among trading partners). Also, the private blockchain solution is designed to help reduce fraud and errors, reduce the time products spend in the transit and shipping process, improve inventory management and ultimately reduce waste and cost.

Besides the potential of saving billions of dollars, the private blockchain solution can improve workflow and better visibility and security. Specifically, the private blockchain enables each user in the supply chain to track the progress of goods through the supply chain, locate a container is in transit, observe the status of customs documents, view bills of lading and other data in real time. Also, the private blockchain is secure because it does not allow any user to modify, delete or even append any record without the consensus of all other users in the supply chain. This level of transparency helps reduce fraud and errors, reduce the time products spend in the transit and shipping process, improve inventory management and ultimately reduce waste and cost. Ultimately, the visibility and verifiability of private blockchain among trading partners can make global trade more accessible to a much larger number of players from both emerging and developed countries.

The actual value of bitcoin as a decentralized digital currency without a central repository or single administrator remains unknown, but the value of private blockchains appears to be promising!

[2] Smart contracts are software-based agreements that can be executed and enforced automatically according to the terms of the contracts. For a detailed discussion about how smart contracts work, please see Peck (2017) “Blockchains: How They Work and Why They’ll Change the World,” IEEE Spectrum, October 2017, pp. 24-35.

[3] DTCC (dtcc.com) is a financial utility that holds the books on which firms record their trades including securities trading.

https://blogs.anderson.ucla.edu/global-supply-chain/2018/04/blockchain-can-make-global-supply-chains-more-efficient-and-secure.htmlSocially Responsible Dronestag:typepad.com,2003:post-6a0115710a4d7d970c01bb09f7d0d5970d2018-03-01T09:38:37-08:002018-03-01T09:43:07-08:00Christopher Tang Besides military and delivery drones, one wonders if drones can be used for socially responsible applications. Apparently, they can. Here are some applications: Increase hurricane forecast accuracy. It is difficult to improve the forecast accuracy about the path and the strength of hurricanes to save lives. A team...UCLA Anderson DOTM area

Christopher Tang

Besides military and delivery drones, one wonders if drones can be used for socially responsible applications. Apparently, they can. Here are some applications:

Increase hurricane forecast accuracy. It is difficult to improve the forecast accuracy about the path and the strength of hurricanes to save lives. A team of scientists at the University of Florida is investing the use of a swarm of six-inch-long drones to ride through hurricanes to collect data on temperature, pressure, humidity, and location.

Improve search and rescue missions. Search and rescue missions are time-consuming, expensive, and often dangerous for the people involved. However, with the use of drones equipped with visual, audio, heat-sensing, cellular-sensing surveillance technologies, these missions can be more effective and efficient especially when there is a need to cover large areas of inaccessible terrain or at night.

Improve farming productivity. Due to the mountainous terrain in many rice-growing countries, it is difficult to monitor the health of the crops in a large area. Drone companies such as DJI have developed drones that can save time and cost and improve yields for farmers. Specifically, these drones can use cameras to spot where nitrogen levels are low, and use infrared light cameras to monitor plant health by analyzing photosynthesis is in various plants.

Reduce mosquito-borne diseases. To save lives, government agencies find it challenging to reduce the population of the most deadly animal – the mosquito. Spraying pesticides is expensive and time consuming in large areas. In 2016, USAID funded an organization called WeRobotics to develop special drones that can deploy sterile male mosquitoes to reduce local populations of mosquitoes by 90%. To pack as many mosquitoes as possible without damaging them, they put these mosquitoes to sleep by packing them in pre-cooled containers in low temperature. Once these mosquitoes are released in the area, the warmer external temperature will wake them up so that they can fly off to do the right thing.

https://blogs.anderson.ucla.edu/global-supply-chain/2018/03/socially-responsible-drones.htmlTo surge or not to surge?tag:typepad.com,2003:post-6a0115710a4d7d970c01b8d2c703c8970c2017-12-13T08:31:57-08:002017-12-13T08:32:33-08:00Christopher Tang On June 24, three largest supermarkets in the United Kingdom (Tesco, Sainsbury’s and Morrisons) announced that they are working on secret plans to install “surge pricing” systems in order to “smooth” customer demands over the course of a day. For instance, these supermarkets can replace the traditional paper...UCLA Anderson DOTM area

Christopher Tang

On June 24, three largest supermarkets in the United Kingdom (Tesco, Sainsbury’s and Morrisons) announced that they are working on secret plans to install “surge pricing” systems in order to “smooth” customer demands over the course of a day. For instance, these supermarkets can replace the traditional paper tags on shelves with electronic labels so that the stores can change their prices several times per day at the click of a button. This way, the store can charge a higher price during rush hours and a lower price during non-peak hours.

Many customers are used to the idea of surge pricing adopted by Uber. Therefore, it is natural to think that surge price should enable stores to segment their customers: time-sensitive customers pay a higher price during peak hours and less time-sensitive customers and pay a lower price during non-peak hours. This seems fair and reasonable. Hence, many would think that all supermarkets should adopt surge pricing, right?

I am not so sure. Here are two reasons why not all supermarkets should adopt surge pricing:

If all stores adopt surge pricing, then it will definitely create the incentives for time insensitive and price sensitive to shop during non-peak hours and let those time sensitive consumers to shop during the peak hours. However, what will happen if one of the stores decided not to surge? In this case, this store may absorb some of those time insensitive and price sensitive to shop.

Habitual shopping behavior. Even though some customers are time insensitive and price sensitive, they have developed their habits to shop during certain time windows. Unlike take a ride from Uber that is more spontaneous, shopping at a supermarket is more habitual. As such, the store who decided not to surge can get these shoppers to shop without changing their habits. Once these customers develop a new habit to shop at this store, they are unlikely to switch back. In that case, stores who adopt surge pricing may end up losing some of their customers to stores that do not surge.

Therefore, it is not obvious that all supermarkets should adopt surge pricing to obtain a higher profit. And we shall see.